The Confederate Truths

The Confederate Truths Free Online Research Papers The enormous impact of the Civil War on our nation will probably never be determined, but would never have been possible without the courageous stand of the Confederate States of America against invading Union forces. The independence of the Confederate States commenced by the withdrawal of the State of South Carolina from the Union of the United States. The ordinance of secession was passed on December 20, 1860 by a unanimous vote. The withdrawal of South Carolina from the Union was followed successively by the states of Florida, Mississippi, Alabama, Georgia, and Louisiana. A convention of delegates from these six seceding states assembled in Congress at Montgomery, Alabama, to organize a Provisional Government, on the 4th day of February 1861, where they drafted a constitution for the Confederate States of America (Clarke 3). Many different efforts were made to save the Union and prevent a war. Some believed the Constitution did not allow the North to take an action against the South. An amendment was even passed saying Congress could never interfere with slavery in the states, but it was not ratified by the necessary number of states and was forgotten when the Civil War began. The existence of slavery was the central element of the conflict between the North and South. Other problems existed that also helped lead up to succession. It appears that the only way for the war to have been avoided was to abolish slavery, but this could not be done because slavery is what kept the South alive and running. Lincoln argued that people who were in opposition, or divided against themselves, could not stand, thereby making it impossible for government to endure permanently with the states divided in half. Therefore, because there were two opposing regions or societies and slavery could not be abolished, the Civil Wa r was inevitable (Clarke 4). The Hon. R. M. Barnwell, of South Carolina, was appointed temporary chairman. Forty-three men of these six southern states adopted the Constitution of the Confederate States of America on Friday, February the 8th. The following day, Congress proceeded to the election of President and Vice-President. Jefferson Davis, of Mississippi, President, and Alexander H. Stephens, of Georgia, Vice-President, were elected by unanimous vote. They were sworn in on February 18, 1861 (Clarke 13). Davis, who had been elected President, actually wanted to be appointed General in the Confederate Army. He was a graduate of West Point, fought as a Colonel of Mississippi Rifles in the Mexican War, and was Secretary of War. He was pleased, however, when he was informed that he would be the President of a fledgling nation. When Davis had attended West Point, he had clearly read in his textbooks, that any state had the right to secede. However, before leaving his U.S. Senate seat, he wanted to compromise. Dav is knew that if the South declared independence, a war was immanent. Davis pointed out that the South was not the first to consider secession. The states composing New England had three times considered secession. Once during the War of 1812, once during the admission of Missouri as a slave state, and once with the admission of Texas into the Union. Therefore, he rationalized that secession was legal. (Clarke 24). â€Å"On February 1st, 1861, the State of Texas declared her independence by withdrawing from the Union, and uniting herself with the new Confederacy. Virginia, Tennessee, Arkansas, North Carolina, and Missouri also resumed their original sovereignty, and were admitted into the Confederacy.† (Clarke 18). Jefferson Davis, in his inaugural address, stated simply that, â€Å"All we ask is to be left alone† (Clarke 27). By April, the tension between the Union and Confederacy had become too great. When Major Anderson refused to surrender Fort Sumter in Charleston harbor, the Confederate harbor guns opened fired. In the siege, the only casualty was a Confederate horse. It was a bloodless start to a very bloody war. â€Å"Invoking his states Revolutionary motto, Sic Semper Tyrannis, a young Virginia officer filled letters to his mother with comparisons of the Norths war of subjugation against the South to Englands war upon the colonies† (Clarke 78). He was confident that the Confederacy would win the â€Å"second War for American Independence† because â€Å"Tyranny cannot prosper in the nineteenth century against a people fighting for their liberties.† (Clarke 9). Most southerners who volunteered to fight felt this way. As a Confederate officer wrote they were not only fighting for their freedom, but for their relatives and descendants because they strongly believed in that they had the right to secede and that their constitution was stronger than the Union’s. Therefore, the average Confederate soldier believed that he was fighting for his rights, independence, his family and ultimately to protect his homeland form what many Southerners now considered to be a foreign nation. Until the emancipation proclamation was issued in 1862, the Union was fighting for just that, the Union. When Lincoln issued his proclamation, it outraged many officers in the Union army (Clarke 17). Most Southern soldiers did not care about slavery one way or the other. Only the elite planter and politician class cared at all about retaining their slaves. (Clarke 45). They viewed the proclamation with contempt. It freed only slaves in the Confederacy, not in the bo rder states of Maryland or Kentucky. Later, Lincoln by his own admission proclaimed that his proclamation at the time carried no weight. (Clarke 17). Indeed, the Confederate constitution made slavery legal in the South, but it declared the further importation of slaves from foreign countries (the U.S. included) to be illegal. So how do we know that most Confederates did not fight just for slavery? They wrote letters, kept diaries, and they were encouraged to write them. A misnomer is that Civil War soldiers were illiterate. However, the armies of the Civil War were the most literate in history up to that time (80 percent of Confederates, and 90 percent of white Unionists) and consisted mainly of volunteers rather than draftees or long-service regulars (Clarke 34). Only one in fifteen of all Southern whites ever owned a slave. Overall, there were fewer than 350,000 Southern slave-owners. However, there were some 600,000 soldiers in the Confederate Armies (9 out of 10 free white males ). Therefore, if all slave owners were in uniform- and certainly they were not- this still leaves several hundred thousand soldiers with no personal interest in slavery but rather in states’ rights and the concept of the Confederate constitution (Clarke 9). With losses between 20 and 30 percent in large engagements, the south needed a better system for recruiting, training, and arming its soldiers. By late 1862, the Confederate Congress authorized and approved the National Conscription Act. It stated that all male citizens between ages 18 and 35 had to enlist in the Confederate Army. This outraged many southerners. They were upset at the fact that they were fighting for liberty, and it was their choice to fight, or not. In the mountainous regions of Eastern Tennessee, North Georgia, and Western North Carolina, protest to the draft was significant. Many in these regions had opposed secession in the first place, and were not about to be told they had to fight for something they did not believe in. In addition, there were two clauses in the draft that upset many southerners; first, a planter owning more than 20 slaves was exempt from serving. While this was a small minority in the country, it was a large majority in the Confederate Congres s; Second, there was a Substitution clause that stated that one could get someone else to take ones place. Many soldiers now declared that the war was â€Å"A rich mans war, a poor mans fight.† (Clarke 129). However, the draft served its purpose. Many southerners looked upon a draftee as being a coward. Therefore, with the passing of the draft, the volunteer rate soared. Many men volunteered instead of waiting to be drafted. The draft worked, and by 1863, the Confederate armies were as large as they would ever be. Even when the war took a turn for the worst after Gettysburg and Vicksburg, the armies kept fighting. â€Å"Outnumbered, underfed, and poorly equipped, they withstood one of the worlds most powerful military forces for four years of the bloodiest warfare ever raged in the Western Hemisphere. The concepts of southern nationalism, liberty, self-government, resistance to tyranny, and other ideological purposes (were) a concrete, visceral form: the defense of home and hearth against an invading enemy.† (Clarke 18). To stay alive, the South also pursued an aggressive foreign policy throughout the war. â€Å"There is no doubt,† said William E. Gladstone, Britains Chancellor of the Exchequer, â€Å"that Jefferson Davis and other leaders of the South have made an army; they are making, it appears, a navy, and they have made what is m ore than either- they have made a nation. We may anticipate with certainty the success of the Southern states.† (Clarke 128). The South pursued a policy that stated that â€Å"Cotton was King†, and that Europe could not live without it. Surely, they thought, Britain or France, or both would intervene on behalf of the Confederacy. It never happened. Britain and France, while sympathetic to the Southern cause, did not have the backing of the working class of their nations and at best could only help the Confederacy get around the blockade. The War between the States was the defining point of the last century, and we still feel its affects today. Civil War re-enactors live like, and fight like our ancestors. African Americans fight on both sides, just like in the war. Over 50,000 of free blacks- 12% of the Confederate Army- took up arms in defense of their native south. While the number of African Americans that fought for the North is much greater than that of the South, the blacks in uniform in the North made up only 10% of its force. It is still an issue often overlooked by historians. The Confederacy fell to Union powers in 1865, with the surrendering of the armed forces and the capture and imprisonment of Jefferson Davis. â€Å"Were these things real?† wrote Sam Watkins, who fought in the First Tennessee from the beginning of the war until its end. â€Å"Did I see those brave and noble countrymen of mine laid low in death and weltering in their blood? Did I see our country laid waste and in ruins? Did I see soldiers marching, the earth trembling and jarring beneath their measured tread? Did I see the ruins of smoldered cities and deserted homes? Did I see the flag of my country, which I had followed for so long, furled to be no more unfurled forever? Surely they are but the vagaries of mine own imaginationBut, hush! I hear the approach of battle. That low, rumbling sound in the West is the roar of cannon in the distance. (Clarke 417). Th e enormous impact on our nation by the Civil War will probably never be determined, and would not have been possible without the stand of the Confederate States of America. Clarke, Whitford William. Volunteers in the Civil War. Rio Grande Press, Inc.: Sante Fe, 1971. Research Papers on The Confederate Truths19 Century Society: A Deeply Divided EraNever Been Kicked Out of a Place This NiceQuebec and CanadaThe Effects of Illegal ImmigrationPETSTEL analysis of IndiaTwilight of the UAWHip-Hop is ArtAssess the importance of Nationalism 1815-1850 EuropeCapital PunishmentComparison: Letter from Birmingham and Crito

Identifying and Managing Risk Research Paper Example | Topics and Well Written Essays - 750 words

Identifying and Managing Risk - Research Paper Example The market risk is associated with the uncertainties in the areas of foreign exchange rate fluctuations, fluctuation of interest rates, fluctuation of stock prices and commodity prices. The market risk is managed by the use of interest rate swaps, options and future. The use of derivatives in financial market is important to hedge market risks. The risk management techniques are used to reduce the credit risk of the organization which occurs as a result of default of the counterparties. The credit ratings are used to assess the credit risk of organizations. The credit risk is reduced by limiting the exposure to the parties considered to be risky for repayment (Deventer,  Imai and  Mesler, 2013). The other credit risk management tools used are by the use of collaterals, periodic marking to the market, captive derivative subsidiaries and netting. Netting is a risk management technique through which the amount of cash owed by one party to another is reduced by the amount by the latt er to the former. There are various methods of netting which includes bilateral netting, multilateral netting, payment netting, cross product netting and close-out netting. Several types of derivatives like over the counter derivatives and credit derivatives are used to mitigate the exposure to credit risks. The types of credit derivatives include Total return swaps, Credit Swaps and Credit Options. Several authors have explained different financial risk management techniques that are widely used in the industries. Analysis: Comparison of financial risk management techniques A comparison of the financial risk management techniques explained by Kallman  to that of Cohen and Palmer is given below. Kallman explained that we should a clear idea of the nature of risks that need to be mitigated. According to Kallman, the risk exposures could be categorized into strategic risks, operational risks and economic risks. The strategic risks are the uncertainties that rise in the long term. Th ese may be quality risk, brand risk, etc. The operational risks are the uncertainties that occur within a single operating period as a result of the operations of the company. The economic risks are the areas of uncertainty created as a result of volatility in political and financial conditions (Kallman, 2007). These risk exposures are mainly due to the changes in macro and micro economic conditions. The economic risks take the form of interest rate risk, foreign exchange risk, etc. The risk exposures may be pure which results in a loss of values or speculative which may either result in a gain or loss. The popular risk management tools proposed by the author are risk surveys and checklist. The survey and checklist are important tools to build a risk register in the organization. Flowcharts of organizational process are useful in identifying the risks involved. After identification of risk, the risks are managed by risk management techniques that include statistical analysis, financ ial statement analysis and also personal inspection. The risk management techniques explained by Kallman could be compared to the risk management techniques explained by Cohen and Palmer. According to Cohen and Palmer, the

Strategic managment implementation, for the golar lng company Essay

Strategic managment implementation, for the golar lng company - Essay Example Floating Storage and Regasification Unit is a product of GolarLNG. According to their website, it is based on the conversion of an existing LNG carrier into a floating terminal that can be situated offshore or at a new or purpose-built jetty/pier. It will receive liquid natural gas (LNG) from offloading LNG carriers, and the onboard regasification system provides gas send-out through flexible risers and pipeline to shore. European imports rose 0.9 bcf/d, where Spain led by +0.5 bcf/d and Italy by +0.1 bcf/d. The entire shortfall was absorbed by the US with import s down 1.7 bcf/d year-on-year. In 2009, overall 22 countries were importing LNG. The imports are expected to grow by a large amount in the coming years. The Floating Storage and Regasification Unit have become really popular in the last few years. It is relatively a new concept, and Golar LNG is the first one in the world to deliver it. With this fact that they are the first one to introduce it, they have a competitive edge. With these advantages, Golar LNG has to market its service in a way that it maintains its market share in FSRU. They haven’t marketed their service greatly in order to attract and retain their customers. For this purpose, they need to create a proper marketing plan. Although this service does not have any specific customer. This service is for all the importers of LNG. But in order to start marketing, Golar has to cater to individual regions needs first. This marketing action plan will be the segment catering to the importers in Asia. The segment is made according to the demographics. The FSRU service is for providing ease and comfort to the importers, who would easily be able to import LNG with the help of these floating terminals. The Service is positioned to be inexpensive, yet having a highly advanced technology. Any kind of product or service needs marketing. In maritime industry, marketing is considered to be unimportant. But experts say that marketing is

Gay adoption Essay Example for Free

Gay adoption Essay Although courts have gone to great lengths to provide every child with one mother and one father, the realities of family formation and parenting are considerably more complex. Just a few years ago, most children grew up in a traditional or nuclear family, which refers to the conjugal household consisting of a husband, a wife, and their dependent children, whose relationships are traditionally recognized by family law. Today, fewer and fewer households are deemed traditional families. Societal changes have brought about the rise of alternative or non-traditional families which include group living, unmarried cohabitation and single-parent families, all of which are mutually interdependent households, but not, historically, so recognized by family law. Although these arrangements specifically same-sex couples appear to be distinct from the traditional family, they often embody and preserve the many values and functions of the traditional family, including support, loyalty, values, welfare, love and affection. Furthermore, many committed same-sex couples have and raise children. Nevertheless, for those living in these alternative arrangements, the law has not kept pace with these social evolutions. Moreover, in order for these individuals to assert any legal rights based on a family relationship, such as health insurance and inheritance benefits, they must first be acknowledged as a family member. Unfortunately, however, the law has made it overwhelmingly difficult for both male and female same-sex couples to be recognized as having a family relationship with concomitant legal rights and duties. The most permanent, binding way of becoming a non-biological parent is by adoption. Adoption is the legal proceeding, which establishes the legal relationship of parent and child between persons not already so related. Blood ties between adopter and adoptee are unnecessary. The adopted child is entitled to all privileges belonging to a natural child of the adoptive parents including the right to inherit, while the parent incurs the responsibilities of a parent with respect to the adopted person. In addition, as part of the process, the biological parents rights and responsibilities are terminated. As a general rule, either a married or unmarried person may undertake adoption and the requirements are generally the same in either case. In the former, however, its required either that the petition be made jointly or be consented to by the other spouse. The two basic requirements for someone trying to adopt are age and residence. The most commonly encountered age requirement is that the adopting parent be at least 21 years of age. Many statutes merely specify any adult or any person of lawful age, but the usual effect of this provision is as just stated.

Benefits of the Weight Watchers Program Essay -- Health Nutrition Diet

Benefits of the Weight Watchers Program Weight Watchers is an excellent program to aid in weight loss and healthy eating. It is an easy, healthy, and effective method for losing weight and eating correctly. Weight Watchers has based their program on a point system, making it easy to follow by counting points assigned to foods. It promotes healthy eating habits by regulating serving sizes, which are set by the United States Department of Agriculture. In addition to promoting healthy eating habits, it offers support for people who might need it. The support, along with the eating plan, helps dieters lose weight and eat healthy. Weight Watchers is very easy to follow. This is because the program has allocated a point value to every food. The points are related to the amount of calories the food contains; the more calories a food has, the more points it is given. For example, one apple has one point. The dieter is allowed a certain number of points per day, therefore restricting the amount of calories from anywhere between 1200 and 1700. Depending o...

America is not a better country than it was in the 1950s

There are many people in the United States that claim the country is better today than it has ever been. The country has undergone two centuries of transformation, as people have increasingly gained more and more rights and freedoms, technology has made the lives of all Americans markedly easier, and its citizens have elected its first African-American president only a century after slavery ended. However, despite all this progress, it comes with a significant cost as people are forced to deal with threats like terrorism, unchecked scientific experimentation, and the dissolution of the American nuclear family.It seems that much of the current line of thought in the American public came during the social revolution of the 1960s, when sex, drugs, and rock and roll were used in conjunction with far more important social issues. The social rebellion of the 1960s, along with the unpopular war in Vietnam, gave way to the depressing decade of the 1970s, and the selfishness of the 1980s, whi ch still seem to have the public in its grasp in the quest for empty consumerism. For a look back at a time when America represented the ideals that country was founded upon, one would have to look all the way back to the 1950s.During this decade, America took its place as a respected world leader, family values were still strongly in place, consumerism and technology were used to advance the country and humanity in general, and while there were still threats to the safety and well being of American citizens, there were far fewer threats than each American is forced to deal with today. In evaluating the position of the United States in the world today, it is still a world leader. However, many of the events of recent years have only made the country a target of derision, criticism, and worse, even from its allies.In the 1950s, the world was still reeling from the horrors of the Second World War. America emerged from the turmoil as one of the world’s great superpowers, along w ith the Soviet Union. America was seen as the champions of democracy, responsible for allowing the Allies to win the war and bringing freedom and peace to millions around the world. However, much of this good will and power have been slowly eroded in the decades since, and almost completely removed after the events of the past decade.After the terrorist attacks on September 11, 2001, America had the good will and support of the entire world. However, poor leadership quickly led these same supporters to accuse America of being imperialistic and ignorant. President George W. Bush did little to help dissuade this view, and in fact contributed to America’s decline more than any president since Richard Nixon resigned in disgrace. Though the election of Barack Obama has brought a fair amount of good will back to America, the damage done by Bush is long and lasting.While Christian conservatives supported Bush, his personal beliefs seriously held up scientific discoveries in the way of stem cell research by refusing to support federal funding; he denied social advancements to people fighting for equal rights; he spearheaded a renewed campaign to take away women’s rights; he also was instrumental in creating a new paranoia over immigration, despite being the president of a country made of immigrants; and, the gap between the rich and the poor continued to grow until the country found itself poised on the brink of depression.But, his greatest shortcomings were concerning the war on terror, which needlessly expanded, and his flippant abuse of federal power concerning the privacy of U. S. citizens. For a president that used the word â€Å"freedom† so frequently, he did more than most presidents to take it away from his fellow countrymen. A man who avoided serving in Vietnam, Bush learned none of the lessons and started a war in Iraq that has been compared by many as the Vietnam War of this generation. For someone that touted simple American values and hard work, Bush and his administration did a great deal to hurt America and make it weaker.This is very different than the strong leadership of Dwight D. Eisenhower who used his military experience and knowledge to make sure that America remained strong and vigilant in the postwar world. Additionally, Eisenhower’s presidency also saw the emergence of a modern American system of strong family values that have all but disappeared in recent years. American family values have certainly fallen off since the 1950s, and things like divorce as well as drug use have grown to epidemic numbers.One of the key differences is the fact that couples are no longer staying together, divorce rates have gone through the roof, and the traditional nuclear family no longer seems to exist. According to an analysis of new census figures by The New York Times, married couples, whose numbers have been declining for decades as a proportion of American households, have slipped into a minority in the Uni ted States. The American Community Survey, released in October by the Census Bureau, found that 49. 7 percent, or 55. 2 million, of the nation's 111.1 million households in 2005 were made up of heterosexual married couples — with and without children — just shy of a majority and down from more than 52 percent five years earlier (Hurley). This trend shows that less and less heterosexual couples are choosing to get married, instead preferring to cohabitate and have children without marriage. These figures do not include divorce rates. In the United States, it is widely believed that one in two marriages will end in divorce, though these figures are debatable.This rate has since been revised downward to roughly 43% by the National Center for Health Statistics but was moved back up to around 50% by the Census Bureau in 2002. Most recently, according to the New York Times, it has been revised downward to just over 40% (â€Å"Divorce Rates†). This lower figure could b e due to the fact that less people are getting married, but it cannot be denied that in a society of increasing equality and civil rights, less people are getting and staying married than ever before.This is quite different than the 1950s, when the nuclear family was something that most people aspired to create: â€Å"Nearly all accounts of the 1950s stress the great importance attached to home, family, and children†¦ Indeed, widely read authors and commentators and well-known political leaders in the 1950s all extolled the virtues of a traditional family life. Women’s magazines published a steady stream of articles praising the homemaker and warning women of the perils of trying to combine marriage and childbearing with work outside the home† (Cherlin 35).Today, usually just to make ends meet, parents are often both forced to work, leaving very little room for the simple family activities that were so valued in the 1950s. This leads to a society that is increasin gly more isolated from each other and living with more fear and anxiety than ever before. This has also led to an increase in the amount of drugs that Americans consume, something which was virtually unheard of in the 1950s. The war on drugs was started in the 1980’s helped along by Nancy Reagan’s slogan, â€Å"Say no to drugs.† While this continues to apply to illegal drugs, in the years since Americans have answered with a resounding â€Å"yes† to legalized drugs. This displays how the war on drugs is not really how it sounds and is really a hypocritical creation. Drugs have become a part of the American fabric, and that is no more apparent than the recent explosion of popular legal drugs. Today, Americans use drugs to remedy everything from receding hairlines, to erectile dysfunction, to the boredom of everyday life.Federal regulations are strict in regards to advertisements of such legal drugs like cigarettes and alcohol, but not pharmaceuticals. Ads for various legal drugs seem to be all over the television, print media, and the internet. In America, the war on drugs could really be renamed â€Å"the war on drugs deemed undesirable by the government,† because there remain many, many potentially harmful and addictive drugs in the public marketplace. In 1998, Americans spent $66 billion on these drugs, including $39 billion on cocaine, $12 billion on heroin, $2.2 billion on methamphetamine, and $11 billion on marijuana (ONDCP). During that same year, Americans spent more than $120 billion dollars on legal drugs, not including the staples alcohol, nicotine, or caffeine, and this number has only continued to grow. And while America is fighting a war on drugs that was not even a concept in the 1950s, it is also fighting an open-ended war on terrorism. Few things show the differences between today and the 1950s as the state of international terrorism and the fear it invokes in people. Even in the 1950s, where the U. S.fought i n Korea and there was a constant threat of nuclear annihilation, the level of fear that American citizens felt during that decade pales in comparison to what it feels in the post-9/11 world. The entire country has been in a frightened and angry state, with the threat of terrorism going hand and hand with government intrusion, religious hatred, and economic failure. After the September 11, 2001 attacks, â€Å"fear of terrorism became something of a way of life for government, first responders, and many citizens, even though no additional attacks on the American mainland have occurred† (Smelser 124).The threat of terrorism has not only affected the American psyche, but it has also led to the deaths of thousands of American soldiers who are busy fighting the long wars in Afghanistan and Iraq. And, unfortunately, there appears to be no end in sight for either war, and casualties only continue to mount on both sides. Despite all the international turmoil that followed the Second W orld War, there was always stability and confidence in America.Now that the confidence is eroding, one can only hope that stability can continue to be achieved. The United States was far better off in the 1950s than the country is today. While it had the Soviet Union to contend with, there was hardly more fear than there is today over the faceless and suicidal terrorists that threaten the very fabric of everyday life. In addition to all the added fears, there are not even the traditional support systems to help alleviate any of the anxiety, as family values are at an all-time low.People are choosing to no longer get married and when they do get married, they are getting divorced at a pace that continues to grow each passing year. With the drug epidemic, war, moral decay, and fear in the current America, one can only think back on the simpler and more stable times that marked the 1950s. Works Cited: Cherlin, Andrew. Marriage, Divorce, Remarriage. Cambridge: Harvard University Press, 1981 â€Å"Divorce Rates. † Divorce Reform Page. 2009. Americans for Divorce Reform. 12 July 2009. . Hurley, Dan. â€Å"Divorce Rate: It's Not as High as You Think. † The New York Times. 19 April 2005. 13 July 2009. . Office of National Drug Control Policy. â€Å"What America's Users Spend on Illegal Drugs 1988– 1998. † ONDCP Publications. 4 March 2002. 13 July 2009. . Smelser, Neil J. The Faces of Terrorism: Social and Psychological Dimensions. New Jersey: Princeton University Press, 2007

The risks in the Securities Market - Free Essay Example

Sample details Pages: 5 Words: 1444 Downloads: 1 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? In the securities markets, both casual observation and formal research has suggested that investment risk is as important to investors as expected return. Formal research such as Capital Asset Pricing Model (CAPM) has demonstrated a strong correlation between risk and return in the securities markets. This paper will focus on the analysis of the theory: first to demonstrate how risk is priced by using such theory and its relations to expected return in the financial markets. Then a brief recap of the historical tests on CAPM and other alternative suggestions to the CAPM. CAPM- risk and return The model is based on mean-variance analysis, it assumes investors are risk averse and when deciding among group of assets they tend to choose mean-variance efficient optimal portfolios. This means that they face a tradeoff between risk and expected return: the portfolio is constructed in a way that either to minimize the variance for a given expected return or VICE VERSA to maximize expected return for a given variance. (Fama and French, 2004) It also suggests that the only relevant measure of a portfolio risk is the Beta, see more in later section. When investors can borrow and lend at the risk-free rate and also have homogenous expectations that is to say, all investors share the same view of the economic world and they analyze securities in the same way (p280, Bodie etc.2009), in terms of expected returns, standard deviation and correlations among asset returns(Sharpe 1964), thus, nobody thinks differently than another. The portfolios of risky assets held by each investor wi ll therefore the same and each obtain optimal portfolio, thus everybody holds the market portfolio as their optimal risky portfolio at M (Figure 1). Figure 1, all efficient portfolios should plot along the Capital Market Line (CML) and this new efficient frontier may change as risk-free rate or risk preference changes. (Somerville and OConnell, 2002). Here, we consider a standard position where portfolio B (Sharpe 1964) indicates a MORE RISK AVERSE INVESTOR and lends some of his funds at Rf and invest the rest in the market portfolio (M) which consists many risky assets, while portfolios C and D invested all the funds plus additional borrowed funds to M. All investors hold M; the capital market must in equilibrium. This is known as the Tobins Separation Theorem (Somerville and OConnell, 2002). Figure.1. The efficient frontier when risk-free borrowing and lending allowed. New efficient frontier-CML Risk here has two components: systematic or unsystematic and its measured by standard deviation ÃÆ' Ãƒâ€ Ã¢â‚¬â„¢. The efficient portfolios along CML contain zero unsystematic risk and only carry the systematic risk. Thus, only efficient portfolio plot on CML and inefficient portfolio do not. i.e., portfolio C is efficient, D is inefficient. Consider portfolio C with risk as follow (p248 Bodie etc.2009): ÃÆ' Ãƒâ€ Ã¢â‚¬â„¢C = ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²CÃÆ' Ãƒâ€ Ã¢â‚¬â„¢M + ÃÆ' Ãƒâ€ Ã¢â‚¬â„¢eC Total risk = Systematic risk + Unsystematic risk Since portfolio C is efficient, thus unsystematic risk becomes zero: ÃÆ' Ãƒâ€ Ã¢â‚¬â„¢eC =0 and it contains only systematic risk which cannot be eliminated through diversification: ÃÆ' Ãƒâ€ Ã¢â‚¬â„¢C = ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²CÃÆ' Ãƒâ€ Ã¢â‚¬â„¢M. Whereas portfolio D is inefficient, thus unsystematic risk is not equal to zero: ÃÆ' Ãƒâ€ Ã¢â‚¬â„¢eD ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã‚ °Ãƒâ€šÃ‚   0, which means firm`s specific risk cannot be fully diversified. However, both portfolios offer the same expected return: this implies unsystematic risk is not priced in CAPM, which means there is no additional return for bearing unsystematic risk because it can be eliminated through diversification. Thus, in a fully diversified portfolio only systematic risk remains. The earlier measure of risk by using standard deviation ÃÆ' Ãƒâ€ Ã¢â‚¬â„¢, it is an absolute measure of risk but we need a measure just for the systematic component in this case, thus, ÃÆ' Ãƒâ€ Ã¢â‚¬â„¢ becomes invalid. The appropriate measure is beta ÃÆ'Ã… ½Ãƒâ€šÃ‚ ², where ÃÆ' Ãƒâ€ Ã¢â‚¬â„¢ in figure1 will also replaced by ÃÆ'Ã… ½Ãƒâ€šÃ‚ ² and CML too, will be replaced by the Security Market Line (SML) Figure 2 below. (Copeland and Weston, 1993). Don’t waste time! Our writers will create an original "The risks in the Securities Market" essay for you Create order Figure.2. New efficient frontier SML and risk measure ÃÆ'Ã… ½Ãƒâ€šÃ‚ ² when only systematic risk is priced in CAPM. Portfolio C D (Figure 2) will have the same beta and offering the same expected return, but will not have the same standard deviation as C contains only systematic risk, whereas D contains both systematic and unsystematic risks. The market portfolio M (consists many risky assets) corresponds of beta of one, since beta measures the extent to which returns on the risky assets and market move together (p281 Bodie ect.2009) Portfolio C D lie above M, they must have beta greater than one, which means they are riskier than market index. Portfolio B is just the vice versa of C D. Rf has a beta of zero because its a guaranteed return. Since investors all hold the market portfolio, and its expected return is determined by only one factor of risk (ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²). Then, expected return on any assets i becomes a function of beta, risk free return and market return: Wher e , is the market beta premium and this beta premium is positive meaning the expected return on the market portfolio exceeds the expected return on assets whose returns are uncorrelated with the market return. (Fama, French, 2004) So far, the CAPM tells us size of risk/return tradeoff and prices of risk, it bears only systematic risk ÃÆ'Ã… ½Ãƒâ€šÃ‚ ² give a return, since unsystematic risk is not priced. The higher the beta the higher must be equilibrium expected return, thus relationship between expected return and beta is linear as shown in figure 1. It also suggests that if beta is zero, the expected return is the risk-free rate. CAPM- shortcomings CAPM fails empirical tests in definite, first, many of the CAPM assumptions were considered to be too simple and unrealistic (Fama French (2004). It says all investors hold the same market portfolio of risky assets, Perold (2004) has pointed out in fact they do not, since taxes alone will cause investors to behavior differently. Number of earlier tests such as Black, Jensen and Scholes (1972), Miller and Scholes (1972), and more recent Fama and MacBeth (1973), Fama and French (1992) has rejected the notion of a positive relation between beta and average return. Their results show CAPM tends to be over/under predicts the actual returns: The returns on the low beta portfolios are too high, and the returns on the high beta portfolios are too lowÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ (Fama, French, 2004). The one factor ÃÆ'Ã… ½Ãƒâ€šÃ‚ ² determines the market return was also rejected later, such as earning price ratio (Basus, 1977), firm size effect (Banz 1981), ratio of book value to market value ( Statman 1980, etc), all these factors are associated with returns too. (Fama and French, 2004). The CAPM has been extended in many different versions because its imperfectness including those mentioned above. E.g.: Perolds (2004): risk-free rate borrowing and lending disallowed (Black, 1972); extensions to international investing (Solnik, 1974) along with these, the well known one is the Arbitrage Pricing Theory -APT. (Ross, 1976). Similar model to CAPM but APT returns are determined by not one beta, instead a multi-beta expression and its not based on notion of mean-variance, or market portfolios. (p176 Copeland and Weston, 2004.) Rather its based on the law of one price: two items that are the same cannot sell at different prices (p325, Bodie etc.2009). Otherwise an arbitrage opportunity will rise. The E(R) of APT is a function of several factors and each with its own beta (p176 Copeland and Weston, 2004.). The APT model is more general in a sense 1) many factors used to measure risk 2) unspecified factors: it can be inflation, dividend yield, firm size, etc. CAPM is a special case of the APT 1) one factor market risk premium 2) known risk/return tradeoff- how to measure /price risk. (p188 Copeland and Weston, 2004.). This multi-factor model is significant and empirical tests such as Roll and Ross (1986), suggested that CAPM can be rejected in favor of APT. Conclusion The traditional financial theories like CAPM/APT enable us to price risky assets in the securities markets. CAPM defined risk as ÃÆ'Ã… ½Ãƒâ€šÃ‚ ² and it remains a valid measure of risk in the financial filed today. Its linearly relating to expected return and trade-off between return and risk is positive, these important concepts are also considered to be useful as it allows further research and improvement in the financial theory developments such as the APT. Also Sharpe (1964) used the underlying factors of the traditional CAPM to examine capital assets individually and was able to show results that are consistent with the traditional concept. The traditional financial theories therefore, offer a foundation of understanding and educational insights to the financial markets. Neither CAPM/APT are perfect or free of testing problems, more importantly both have shown value in asset pricing and provided a logic framework for the portfolio management: for that risk and return are s uch fundamental concepts in the financial markets (Varian 1993). Both models are still a useful tool for portfolio selection and evaluation, risk management and capital budgeting. (Copeland Weston, 2004).